An update on the Employment Rights Bill

The Government held talks with trade unions and business representatives to discuss unfair dismissal protections.

Based on these discussions, the Government plans to move forward with changes in the Employment Rights Bill so it can become law on schedule.

Key points include:

• Day-one rights for sick pay and paternity leave will start in April 2026.
• The Fair Work Agency will be launched.
• Unfair dismissal qualifying period will be reduced from 24 months to 6 months, while keeping protections against discrimination and automatically unfair dismissals.
• Compensation caps for unfair dismissal will be removed, and the qualifying period can only be changed by new legislation.

These changes will give workers new rights, including many low-paid workers, and provide clarity for businesses to prepare. 

What is The Fair Work Agency (FWA) 

The FWA is a new UK body being set up to enforce employment rights more effectively. It will combine and replace several existing regulators, including those for the minimum wage, agency work, and labour exploitation.

What it will do:

• Inspect workplaces and check compliance with employment laws.
• Enforce rights like minimum wage, holiday pay, sick pay, and protections for agency workers.
• Provide guidance to employers on meeting legal obligations.
• Make enforcement more consistent and reduce gaps in worker protections.

Why it matters:

• Helps protect workers, especially low-paid or vulnerable staff.
• Gives employers a clear framework to follow, but also increases scrutiny and enforcement risk.
• Part of the Government’s wider plan to strengthen employment rights and improve fairness at work.

What does this mean for employers?

1. Day-one rights for sick pay and paternity leave (from April 2026)

• Employers will need to update HR policies and payroll systems to provide statutory sick pay and paternity leave from the first day of employment, rather than after the current qualifying period.
• This may increase short-term costs, especially for businesses with high staff turnover or seasonal workers.
• Clear communication and administrative processes will be required to ensure compliance.

2. Launch of the Fair Work Agency (FWA)

• Employers will face greater scrutiny and enforcement of employment rights.
• HR and payroll systems must be robust to withstand inspections or investigations by the FWA.
• Businesses will benefit from guidance and support from the FWA but must be proactive in compliance to avoid penalties.

3. Unfair dismissal changes (qualifying period reduced from 24 to 6 months)

• Employees will be able to bring unfair dismissal claims after just 6 months, rather than 2 years.
• Employers must review probation, performance management, and disciplinary processes to reduce risk of claims.
• Legal risk may increase, particularly for small or new employers who often rely on longer qualifying periods.

4. Removal of compensation caps for unfair dismissal

• Potential payouts for unfair dismissal could be significantly higher.
• Employers must ensure robust documentation, fair processes, and HR compliance to mitigate financial risk.

5. Qualifying period can only be changed by primary legislation

• Employers cannot adjust the qualifying period unilaterally; compliance is mandatory under law.

6. Overall implications

• Employers will face increased legal obligations and potential financial exposure.
• They will need updated HR policies, staff training, and monitoring processes to comply with new rights and protections.
• Early planning, consultation with legal advisors, and proactive engagement with employees will help reduce risk and ensure smooth implementation.